For Greece, A Possible Return To The Drachma

Old drachma coins are displayed for sale at an outdoor market in Athens. If the international community concludes that Greece can't be saved as a member of the Eurozone it will have to revert to its old currency.

Petros GiannakourisAP

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Originally published on January 16, 2012 10:04 pm

Austerity measures imposed by international lenders in exchange for billions in bailout loans have cut deeply into Greek pockets. If Greece defaults on its massive sovereign debt, it may be forced to leave the Eurozone.

Yet despite the scores of anti-austerity protests outside parliament, polls show that up to 80 percent of Greeks want to stick with the euro and avoid reverting to the country's old currency, the drachma. Prime Minister Lucas Papademos, a former central banker appointed to the job in November, has also said repeatedly that Greece will do whatever it takes to stay in the eurozone.

"The drachma would be catastrophic," says Dimitris Dimonopoulos, the 43-year-old owner of Souvlaki Bar, a restaurant near the Ancient Agora in central Athens. Many of the restaurants in the area close early because they don't have customers. A quarter of businesses in central Athens have closed because of the economic crisis.

Souvlaki Bar is holding on. It combines cheap traditional food, including the marinated kebabs called souvlaki, with the sleek decor of a European bistro. Dimonopoulos says his business is doomed if Greece reverts to the drachma.

"I import my meat from Denmark because Greece doesn't produce enough," he says. Greece imports far more goods than it exports. The cost of imports would skyrocket under the drachma, says economist Panos Tsakloglou.

"For firms that are importing, the situation will be kind of dramatic in the sense that nobody would accept initially drachmas," he says. That's because if Greece left the eurozone, the immediate transition would be difficult.

"If you want to use drachmas tomorrow, drachmas do not exist," Tsakloglou says. "You need to mint coins. You need to print banknotes and so on. And all these things are not available right now."

The drachma would have no price during this chaotic period, he says. People would run to banks to withdraw their money. They would clean out supermarkets, where most goods are imported. They would also flock to gas stations, since petroleum is also imported.

And once the drachma is established, he says, Greece would be left with a devalued currency.

A devalued currency would help people like Yiannis Yiagos. He makes wooden donkey puppets and sells them at a stand near the Ancient Agora. He points to one puppet, which he makes for one euro and sells for five.

"He cost one euro and sell it five, because it's the euro," he says. "If I had drachmas, I take one drachma and I sell two drachmas."

Yiagos explains that tourists say five euros, which is more than six dollars, is too expensive. So he wants the drachma, so his donkey puppets will sell. He says more tourists will come if Greece is cheaper.

Christos Tsoutsas, who runs a metalworking shop near the Ancient Agora, is also struggling these days.

"I have a big mortgage and I can't pay it," says Tsoutsas, who is 65. He's bundled in a puffy brown coat and sitting near a small heater. His store is empty. "Look around here, I don't have customers," he says. "And I don't know what's going to happen."

Panos Tsakloglou, the economist, says proponents of the drachma claim people like Tsoutsas would benefit if Greece left the euro.

"They hope once we return to the drachma they will repay their loans in drachmas rather than euros," Tsakloglou says. "This is a big 'if' for different reasons. I mean several of our banks have taken loans from abroad. In order to repay these loans, they need euros."

And the Greek state would have to pay much of its own debt back in euros. That means a much bigger debt in drachmas, he says.

Tsoutsas, the metal shop owner, says he doesn't want to take that risk. He wants the euro. So does Dimitris Dimonopoulos, the owner of Souvlaki Bar.

The euro is not just about money, Dimonopoulos says.

"It's very important for Greeks to feel like they're part of the European economy," he says. "How terrible would it be for so many people to have worked this hard for so many years, to have dreams in a country that won membership into the European Union — and then to lose it all."

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

RENEE MONTAGNE, HOST:

And international envoys are in Athens today, trying to determine whether Greece deserves to receive the next installment of its bailout. If Greece can't climb out from under its mountain of debt and can't be saved as a member of the countries which use the euro, it will have to revert to the drachma. As Joanna Kakissis reports from Athens, this is an outcome most Greeks fear.

JOANNA KAKISSIS, BYLINE: Souvlaki Bar is that rare business in Athens that's surviving despite the economic crisis. It's a mix of old and new. It's got those famous kebabs, souvlaki and the sleek decor of a bistro. The food is cheap and good.

Souvlaki Bar is in a neighborhood near the ancient agora. Many of the other restaurants here close early because they don't have customers. Austerity measures imposed by international lenders, in exchange for billions in bailout loans, have cut deeply into Greek pockets. A quarter of businesses have closed in central Athens.

Dimitris Dimonopoulos owns Souvlaki Bar. He's holding on now but says his business is doomed if Greece reverts to the drachma.

And Greece imports far more than it exports. The cost of those imports would skyrocket under the drachma, says economist Panos Tsakloglou.

PROFESSOR PANOS TSAKLOGLOU: For firms that are importing, the situation will be kind of dramatic, in the sense that nobody would accept initially drachmas.

KAKISSIS: That's because if Greece left the eurozone, the immediate transition would be difficult, he says.

TSAKLOGLOU: Technically, in the sense that if you want to use drachmas tomorrow, drachmas do not exist. You need to mint coins. You need to print banknotes and so on. And all these things are not available right now.

KAKISSIS: The drachma would have no price during this chaotic period, he says. People would flock to banks to withdraw their money. They would clean out supermarkets, where most goods are imported, and would run to gas stations. And once the drachma is established, he says, Greece would be left with a devalued currency compared to the euro.

(SOUNDBITE OF WOOD MACHINERY)

KAKISSIS: A devalued currency would help people like Yiannis Yiagos. He makes wooden donkey puppets and sells them at a stand near the Ancient Agora. He points to one puppet, which he makes for one euro and sells for five.

YIANNIS YIAGOS: He cost one euro and sell five, because it's euro. If I had drachmas, I take it one drachma and then sell two drachmas.

KAKISSIS: Yiagos explains that tourists say five euros, which is more than six dollars, is too expensive. So he wants the drachma so his donkey puppets will sell.

KAKISSIS: I have a big mortgage and I can't pay it, he says. Look around here, I don't have any customers. And I don't know what's going to happen.

Economist Tsakloglou says proponents of the drachma claim people like Tsoutsas would benefit if Greece left the euro.

TSAKLOGLOU: They hope that once we return to the drachma, they will repay the loans in drachmas rather than euros. This is a big if for a different reason. I mean several of our banks, for instance, have taken loans from abroad. In order to repay these loans, they need euros.

KAKISSIS: And the Greek state would have to pay much of its own debt back in euros. That means a much bigger debt in drachmas.

Tsoutsas, the metal shop owner, says he doesn't want to take that risk. Like 80 percent of Greeks, he wants the euro. So does Dimitris Dimonopoulos, owner of Souvlaki Bar. The euro's not just about money, he says.

DIMONOPOULOS: (Foreign language spoken)

KAKISSIS: It's very important for Greeks to feel like they're part of the European economy, he says. How terrible would it be for so many people to have worked this hard for so many years, to have dreams in a country that won membership into the European Union and then to lose it all.